Which Sectors Could See the Most M&A Activity in 2024?

After a year that many observers considered sluggish in the arena of mergers and acquisitions, are prospects brighter for 2024? In our recent thought leadership webinar, Joe Mantone, the U.S. Financial Institutions News Desk Manager for S&P Global Market Intelligence, pinpointed the obstacles to M&A activity in 2023 but cited certain areas as promising for 2024. Read on to learn the specifics of Mantone’s predictions for the year to come.

One source of this year’s M&A lethargy was the tech sector, Mantone said. “The tech sector's portion of the total M&A spend of that has fell, it fell to the lowest level in years,” he observed. “Tech is usually a driver to M&A because companies in every sector can use technology, whether it's cybersecurity or some new software there that can improve efficiency. Oftentimes, it's easier for companies to purchase a business off the shelf rather than starting new technology capability in-house.”

But Mantone expected such innovations as artificial intelligence to reverse that trend. “The high ground AI can certainly lead to deals as companies in various sectors look to utilize that capability,” he said.

Another sector where Mantone expected consolidation to pick up is banking. “The number of bank M&A deals is down substantially this year. There are still some hurdles to bank M&A for sure,” he said. “Mainly, banks have a lot of exposure to underwater bonds that they purchased when rates are lower. This really hurts their valuation and puts a cap on earnings, but we do expect management teams and boards will soon start to capitulate, and we'll see some more deal activity there.”

More broadly, Mantone said he expected to see more M&A activity next year throughout the private equity space. “It's not really a sector, but we're bound to see more activity coming out of private equity,” he said. Why the projected turnaround there? “Just because financial sponsors are sitting on a ton of dry powder, and they need to put that to work. And they also need to provide distributions to their limited partners, especially, if they want to fundraise. So in order to get those distributions, they have to access the IPO market and also sell some of the businesses. So definitely, expect to see PE a bigger factor in dealmaking in 2024.”

To hear further insights from Mantone on areas ripe for mergers and acquisitions in 2024, access our complimentary, on-demand webinar.

For more M&A trends, read our Big Picture outlook report.